- U.S. District Judge will hear a case pertaining to the Securities and Exchange Commission’s biggest enforcement action against a blockchain developer.
- Telegram developers believe they have made a better Blockchain than Ethereum or Bitcoin.
- The SEC sued Telegram in October 2019 and prevented the launch of their platform and stopped the Gram trading.
On the 19th of February, U.S. District Judge Kevin Castel of Manhattan will hear a case pertaining to the Securities and Exchange Commission‘s biggest enforcement action against a blockchain developer.
The case is that Telegram violated security laws when they raised $2 billion to create a new Blockchain platform. However, Telegram argues that it didn’t need to register its offerings.
At the moment, at least one SEC commissioner agrees with Telegram. Commissioner Hester Peirce delivered a speech at the International Blockchain Congress, where she agreed, indirectly, that Telegram isn’t breaking any laws.
Pierce also suggested the introduction of a new regime that would grant network developers a three-year safe harbor to establish active and decentralized trading of their cryptocurrency tokens.
To understand the seriousness of this case, one needs to understand the facts. Telegram developers believe they have made a better Blockchain than Ethereum or Bitcoin. The SEC doesn’t consider their coins as securities. However, Telegram sold some digital tokens as securities to generate capital.
The SEC sued Telegram in October 2019 and prevented the launch of their platform and stopped the Gram trading. The reason provided by SEC is “Grams can’t be disentangled from the investment contracts between Telegram and its investors.
Under the U.S. Supreme Court’s definition of a security in 1946’s SEC v. Howey (66 S.Ct. 1100), the digital currency is a security, like a stock certificate. So every transaction involving a Gram, in the SEC’s view, is subject to securities laws and must be conducted by a broker. “
SEC and Telegram are debating whether, Gram is to be traded at such a scale, the company and the investors would lose control of the market. SEC says that Telegram is keeping 2 billion Grams to itself.
Thus, it can control the market. Telegram has said that its goal is an independent market, and it is trying to assure SEC that there is no need to worry. Next week, the hearing would take place, and Pierce’s view might come in handy even though she is only one of the SEC’s members.